Community property laws and taxation

There are nine community property states; Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Generally, if you are domiciled in one of these states, and your tax filing status is Married Filing Separate, your MFS tax return will reflect exactly half of the combined income from both you and your spouse, despite whomever earned it.

As with any other law there are exceptions. Regardless of the general IRS rule that community income be shared equally, and taxed in equal proportions for each spouse, there are circumstances where community income can be segregated and assigned only to the spouse who earned it. This is an important concept to anyone who has, or is planning on a divorce, and lives in one of the community property states.

If your spouse had income for a year, you did not live with them for that year, and they did not share any of that income with you, then there are ways to segregate yourself from the Federal income tax on that income which you were prevented from benefiting from. Contact one of our offices or your licensed tax professional for advice if you think this situation applies to you.